Switzerland Tightens Compliance Requirements for Financial Advisors Amid Regulatory Scrutiny
Regulators are cracking down on compliance requirements for financial advisors in Switzerland following recent scandals involving financial institutions and social media influencers. The European Securities and Markets Authority (ESMA) issued a public statement in October 2021 clarifying what investment recommendations are and how they can be posted on social media platforms.
Importance of Transparency and Objectivity
The ESMA statement emphasizes the importance of transparency and objectivity in investment recommendations to protect investors. EU regulators have also placed crypto-assets under their radar, classifying them as financial instruments if they meet specific criteria. However, many crypto-assets remain unregulated, leaving consumers exposed to risks.
Regulatory Requirements for FinFluencers
In Switzerland, FinFluencers must be aware that promoting financial products or services can trigger regulatory requirements under the Swiss Financial Services Act (FinSA) and the Swiss Financial Institution Act (FinIA). Advertising financial instruments, offering investment advice, or providing investment tips may require licensing obligations.
Key Requirements for Financial Advisors
Under FinSA, advertising for financial instruments must be clearly recognizable and consistent with information contained in a Key Information Document (KID) and prospectus. Producers of financial instruments must prepare KIDs in advance, while offerors do not have this obligation.
Financial advisors are also subject to rules of conduct under FinSA, including:
- Disclosure duties
- Professional knowledge requirements
- Registration obligations
Banks in Switzerland and abroad must refrain from misleading or intrusive advertising with Swiss institutions.
Case-by-Case Analysis Required
To determine the legal prerequisites for both FinFluencers and collaborating financial institutions, a case-by-case analysis of their activities is necessary.
Compliance is Crucial
Regulators warn that compliance is crucial to protect investors and prevent financial scandals. As the popularity of social media influencers continues to grow, it’s essential for these individuals to understand the regulatory landscape and adhere to strict compliance requirements to avoid legal consequences.